MCBRIDE FOR BUSINESS BLOG

The Reality of Company Formation: Getting it Right from the Beginning

Very few of our clients come to us when they want to form a company with dreams of being small. Almost everybody has dreams of growing and getting big, but resources are tight in the beginning, and we understand that. Many clients are looking for an inexpensive way to form their company. Enter websites like LegalZoom.com , where people can buy very inexpensive forms to form their company, or they could even bypass LegalZoom and file the form directly with the state.

It makes a lot of sense, right? Well a couple of issues come up. First, user who do it themselves don’t get any guidance. Even LegalZoom.com and their own disclaimer say, in effect, “You should contact your attorney when using their documents.” Why is this? These documents need to be filled out a certain way. There are certain key provisions that need to be included.

When you’re just filing your certificate of formation with the state, you could be missing some keysteps. In the case of a corporation, you’re missing bylaws and some meetings, which could even mean your corporation is not properly formed, which could expose you to legal liability. In a case in an LLC, you may be missing the LLC agreement. That LLC agreement could give you liability protection, or help you in the event of litigation. We’ve had more than a couple of cases where a client has had litigation down the road, and a LLC agreement that would have been properly written in the beginning could have helped them. We talk about laying the foundation first. This is key, you need to have a correct legal foundation for building your company.

Just like you wouldn’t want to build a beautiful mansion on a pile of sand, you want to make sure you have the right foundation for your company. You want to make sure that you’re prepared for the future. A small amount of money to get your formation correct in the beginning could save you a lot of money later.

What’s been your experience with company formation? Have you ever gone the inexpensive route to be surprised later by the problems that cropped up? Have there been times in your life where spending a little more upfront has led to better results in the future? What’s been your experience with company formation?

This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.

About the Author

R. Shawn McBride — R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Firm, PLLC. Shawn works successful, private business owners in their growth and missions to make a company that stands the test of time. You can reach R. Shawn McBride at info@mcbrideattorneys.com or (214) 418-0258.

This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.